At their modern, leafy campus on the edge of Dublin, directors of Allied Irish Banks PLC were struggling with the news they were hearing from the United States.
This wasn't February 2002, when they learned that their Allfirst subsidiary had lost what amounted to half a year's profit. Bank executives blamed the loss on John M. Rusnak, a foreign currency trader in Baltimore.
This was several years ago, as consolidation in banking began creating behemoths with assets of $50 billion and more, 10 times as large as Allied Irish contemplated when it entered the U.S. market in 1983 by buying 43 percent of First Maryland Bancorp.
The shift in the industry toward huge financial services companies continued to threaten Allied's strategy in the United States after it acquired other small banks - Dauphin Deposit and York Bank in Pennsylvania, and Omni Bank in Delaware - and consolidated them as Allfirst Financial Inc. in 1999.
For years before the trading scandal brought it international embarrassment, Allied Irish remained under pressure from investors and analysts to do more or leave the U.S. market.
Therefore, yesterday's announcement was no surprise, and some wonder whether it's the first step toward an Allied Irish withdrawal from the U.S. market.
"Gradually, $10 billion banks started going by the wayside, and then $20 billion banks," one banking executive said. "The banks were getting bigger and bigger and bigger, and Allied Irish was faced with the issue of how much more growth they could drive through acquisitions."
Allied raised eyebrows with its move into Maryland in 1983. It was a rare regional strategy at a time when foreign banks' entry into the United States was primarily in major financial centers such as New York, Chicago and San Francisco, but Allied executives anticipated that their focus in Maryland would be aided by the removal of restrictions on interstate banking in the United States.
Criticism was muted after growth in the mid-Atlantic region, fueled by jobs in technology, construction and defense, helped Allfirst produce up to one-third of the parent company's profit by 1999.
The strategy was undercut by economic changes that were brewing before Rusnak joined the bank in 1993. The Irish bank's rationale for its U.S. investment dimmed as the economy in its back yard blossomed. Ireland, historically poor and rural, became one of the fastest-growing economies in Europe, fueled by tax and trade policies that attracted technology companies.
"Going back 20 years, it was quite a weak economy. The relative attraction of diversifying for an Irish bank was vastly different," said Stuart Draper, head of research at Dolmen Securities in Dublin. "We live in a different world now."
Earlier worries about the U.S. strategy re-emerged during the past three years as Allfirst lagged behind its peers in the United States while Allied became Ireland's largest bank.
Allfirst's net income peaked in 1998, at $205.9 million. The criticism peaked when last winter's trading scandal in Baltimore drained confidence among investors, analysts and, privately, among Allied officials themselves.
"People questioned if there was a strategy in the States. The Rusnak affair confirmed to a lot of people that the whole strategy was deeply flawed," said Jim Power, an economist at Friends First, a Dublin brokerage.
"They were too small to be big and too big to be small. The direction didn't make any sense," said Power, who added that he is uncertain about the merger that Allied announced yesterday with M&T; Bank Corp. of Buffalo, N.Y., pending approval by government regulators. "This is the beginning of the exit strategy," he said.
Allied officials say otherwise, maintaining that their $3.1 billion deal fortifies their U.S. position. With Allied holding 22.5 percent of the stock, the combined company would be the nation's 18th-largest bank with about $49 billion in assets.
But Allied's recent actions and public comments haven't often jibed. Analysts who follow the company said they were told as late as two months ago by Allied's top executives that the company would try to improve its results by the end of this year before deciding on another course.
Ray Kinsella, a banking professor at University College Dublin, said Allied has moved more carefully than some foreign competitors in the U.S. market but was hurt by the investment turmoil that is also buffeting much larger financial services companies such as Citigroup Inc. and Germany's Allianz AG.
"It's like a famous Irish saying, 'If you ask someone how they would get somewhere, they'd say, 'I wouldn't start from here,'" Kinsella said. "The ballgame has changed. Wherever you look in banking in the States now, you see trouble. There are larger issues.
"But the Rusnak affair was the blow to the solar plexus."